XXI Century Announced Corporate Update
OREANDA-NEWS. November 12, 2010. The board of directors of XXI Century (AIM: XXIC) (the “Board”) announces the following update.
Corporate Update
As previously announced, the Company is currently in discussions with a number of potential investors with respect to a recapitalisation transaction.
The Company is pleased to confirm that it is in an advanced stage of negotiations with one party, but emphasises that there is no certainty that such negotiations will result in a successful agreement, or that the terms and conditions of any investment proposal will be acceptable to the holders of the variable rate guaranteed loan notes (the “Noteholders”) and holders of the Company’s ordinary shares of USD 0.01 (the “Shareholders”).
Consent Solicitation from Noteholders
The Company has today launched a consent solicitation process and issued a notice of meeting to the holders of all of the outstanding USD 175,000,000 Variable Rate Guaranteed Secured Notes due 2010/2014 (the “Noteholders”) (the "Notes"). The Company is soliciting the approval of the Noteholders, by way of an extraordinary resolution, to obtain their consent to reschedule the repayment of the first principal instalment and the associated capitalised interest from 24 November 2010 to 24 May 2011 (the “Consent”).
The meeting of Noteholders to consider approval of this extraordinary resolution will be held on 23 November 2010 at the offices of Baker & McKenzie LLP, 100 New Bridge Street, London, EC4V 6JA at
The background and rationale for the extraordinary resolution is contained in the Solicitation and included below:
“The global financial crisis has had a substantial and adverse impact on the operations of the Company. In response to the difficult economic and challenging property market conditions which arose in Ukraine following the global financial crisis, the Company’s board of directors, together with management, initiated a comprehensive review of the Company’s activities and adopted the following objectives and strategies:
• Maximise liquidity and conserve cash via comprehensive reductions in administrative and overhead expenses, including manpower, but retain key personnel;
• Freeze all developments and capital expenditures;
• Protect and safeguard all the properties pledged as security to Noteholders;
• Revise the business model to focus on core strengths and reduce the property portfolio through controlled sales of selected non-core sites and projects;
• Initiate a restructuring of existing bank loans; and
• Launch a search for a strategic investor to provide new equity.
Notwithstanding the implementation of the aforementioned strategies, the Company has continued to experience significant working capital constraints because the local property markets have remained weak and property values have remained depressed. Management expects that the property markets may begin to recover next year as the economy recovers generally, and especially as and when household incomes rebound and bank lending to the property market resumes.
To finance ongoing operations, the Company has adopted a strategy to sell unencumbered, non-core and non-strategic properties. Earlier this year, the Company sold three non-core sites for cash, however, at a price reflecting a substantial discount to appraised values.
Management has also initiated discussions with the two banks to restructure the secured credit facilities. These negotiations are proceeding, but have not yet been finalised.
Due to the aforementioned circumstances and also because of discussions with potential investors, the publication and delivery to the Trustee and the Noteholders of the Issuer's audited financial statements for the year ended 31 December 2009 and of the Issuer's interim financial statements for the six months ended 30 June 2010, as well as the delivery to the Trustee and the Noteholders of the respective Valuation Reports has been delayed. The Issuer has previously issued announcements to Noteholders and shareholders in this regard.
Concurrent with the aforementioned initiatives, the Company has been actively searching for a strategic investor to bring new cash equity into XXI Century in order to provide working capital, protect core properties and initiate selective developments of properties which would build value for Noteholders and shareholders. The Company previously reported in trading updates and market announcements that discussions were being held with a number of potential strategic investors to recapitalise XXI Century.
The Company is currently in discussions with a number of potential investors with respect to a recapitalisation transaction, and in an advanced stage of negotiations with one party; however, there is no certainty that such negotiations will result in a successful agreement, or that the terms and conditions of any investment proposal will be acceptable to Noteholders and shareholders.
Accordingly, in order to assist the management of the Company to seek successfully to conclude negotiations with an investor, the Company’s board has decided that it is in the best interests of the Company and Noteholders to secure a stand still arrangement described herein in order to provide management additional time to conclude a satisfactory arrangement which the board of directors could recommend to the Noteholders and shareholders.”
Although the Company has received preliminary indications from several Noteholders that they intend to support the Consent Solicitation, there is no certainty that such Consent will be secured. If the Consent is not secured, it is highly likely that the Company will be at significant risk of not being able to meet its obligations to redeem the Notes on the first amortisation date (being 24 November 2010), as set out in the conditions to the Notes.
Inability to meet the Company’s obligations under the Notes when due, would be considered as an insolvency situation and consequently the Board of Directors of the Company strongly believe that this may lead to insolvency proceedings, such as administration or liquidation, being commenced against the Company.
The Company will provide further updates as and when appropriate.
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